SNAP Stock: Testing a Very Important Level of Price Support
A lot of pundits and analysts are coming out of the woodwork and claiming that the recent swoon in the market is a sign that the “easy money” as they call it, which defined the price action since Donald Trump was elected, is over. I try not to put too much emphasis into what these analysts or pundits are saying because I’m not really sure what easy money is and I try not to cloud my judgment with what other people are saying. I prefer to take my cues from the actual market itself.
That being said, I believe that the market sell-off that began in late January has run its course and, aside from a retest of those lows, I happen to believe that higher prices will prevail. The swoon that hit the markets was a much-needed correction, which was needed to restore the health of the bullish trend that is still in development.
My bullish posturing toward the markets is supported by a number of indications, but what speaks volumes is that there are still a lot of stocks poised to make a move toward higher prices and I haven’t seen any signs that would suggest that the current sell-off was anything but a correction.
One of those stocks poised for further gains is Snap Inc (NYSE:SNAP) stock. For those who frequent my work, I outlined on February 8, 2018, in a publication titled “Snapchat Stock Breaks Out and a Bull Market Is Born,” that the surge in SNAP stock following its earnings report was a very significant technical development.
This technical development is illustrated on the following Snapchat stock chart.
Chart courtesy of StockCharts.com
This price chart has been annotated in order to highlight the double bottom price pattern that has been created on the SNAP stock chart.
A double bottom pattern is a trend-reversal pattern that appears at the end of a trend. It is characterized by two distinct rounded bottoms, which are separated by a peak in between. The pattern is confirmed when the stock prices close above the peak that separates the two bottoms, suggesting that a new bullish trend has begun.
The peak separating the rounded bottoms on the SNAP stock chart is not some random arbitrary level of price resistance. It is, in fact, the IPO subscription price and it carries quite a lot of significance. I have been eyeing this price point for quite some time and I have always said that once the Snapchat stock price breaks above this price point, I will have all the necessary indications to suggest that a bull market has finally begun. It just so happens that the double bottom price pattern has coincided around this price point.
The double bottom price pattern was completed on February 7, 2018, and it occurred in epic proportions as the stock gapped right above the IPO subscription price. Gaps of this size are never to be dismissed, and when they leap above a significant level of price resistance, they are very significant and influential. I labeled this gap a breakaway gap because breakaway away gaps rarely get filled and almost always imply that a new trend has begun.
These indications are why I have high hopes for Snapchat stock this year. I’ll go as far as saying it is one of my top picks for 2018.
In reality, I outlined all these developments earlier this month. I am returning to update that publication because I stated that “I would not be surprised if the $17.00 IPO subscription price was tested from above.”
Well, those words have come to fruition and the moment of truth is now upon SNAP stock. If SNAP stock is indeed primed for higher prices, then it will make a stand on the current level of price support and higher stock prices will prevail.
Failing to hold this price point would negate the bullish technical picture that was created, and I hate to say it, but I would have to retract my bullish view on Snapchat stock. I don’t think that this will happen, but the possibility is there, so it needs to be addressed.
Snapchat stock is testing a very important level of price support and in order to maintain my view that a bull market has just begun, SNAP stock needs to maintain its footing above this price point and stage a price advance.